IRS auditing credit counselors looking for phonies.

By Jack, on May 18th, 2006

Credit Counselors say they will help you manage your debt and clear up old debt. As we have pointed out on the page on Credit Counseling, we have found most of those with whom we have dealt to be deceptive and inefficient and some of them to be outright frauds. The IRS is catching on.

The IRS has proposed to revoke the non-profit status of 41 of these organizations, and it is auditing 22 more. (You see the words “non-profit” in their ads and that lends to their credibility.)

According to the IRS, many of these non-profits were just front organizations for profit-making companies that would set up a a so-called “debt management plan” for the consumers, for which they would earn hefty fees — sometimes amounting to thousands of dollars — before anything was paid to the creditors.

These agencies failed to provide useful education or advice and never intended to really help consumers get out of debt.

If you go to the “credit counseling” section at the main site, you will find the name and URL of one credit counseling service that we have found to do what it really promises to do, without exorbitant fees.